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Northeast States of India and the emerging ASEAN economic powerhouses
This paper was prepared by Dr. James R. Ruolngulfor presentation at a seminar on ASEAN markets at Mizoram Universityin 2009. It was accepted. But unfortunately, due to some unexpected and unavoidable difficulties, the author could not attend the seminar.

Abstract________________________The Northeast states of India have become increasingly important in an increasingly globalised world. With its immense resources and potentials, this region is poised to become the ‘gateway’ of an emerging trade between India and Southeast Asia. With recent developments, and especially with the India-ASEAN FTA, this region has come to be seen in a new light. This article explores the possibilities and potential products for trade, the infrastructural facilities, the multifarious problems and the necessary steps to be taken for trade led developments to occur in the region. Introduction
The growth of Regional Trade Agreements (RTA) has been one of the most significant developments in contemporary international relations. This trend towards freer trade and RTAs has accelerated particularly after the Cold War ended. Out of the 108 RTAs notified to the General Agreements on Tariffs and Trade (GATT) over the period 1948-1994, thirty three of them were established in the early 1990s. By the year 2000, almost half of the 220 RTAs notified to the World Trade Organisation (WTO) were initiated after the Cold War (WTO 1995; World Bank 2000: 1). As of March 2009, 184 RTAs have been notified to the WTO and are in force. Currently, there are also several RTAs soon to come into force. The ASEAN-India Free Trade Area (AIFTA) is one among them. Negotiations for this FTA have already been completed and is expected to be signed very soon if all goes well. This is one FTA that could have an important impact on the Northeast states of India in the face of the increasingly closer economic ties and relations between India and its eastern neighbours.
This paper is an attempt to explore trade, examine infrastructural facilities and identify potentials and examine problems for trade-led development for ASEAN[1] and the Northeast states of India in the face of an increasingly globalised world and in the context of the current AIFTA. The paper looks into the beginning of the improved relations between India and ASEAN and investigates how this improved relation affects the Northeast states. It then focuses on the resources and potentials of the Northeast and examines the infrastructure and the problems and constraints for trade-led development in this region. It argues that while the Northeast is truly a storehouse of innumerable wealth with huge potentials to become the centre of trade between India and ASEAN, the poor physical infrastructure, uneven growth rate, absence of proper transport and communications and policies brought about by security concerns keeps this region behind other regions of India. It also argues that the many proposals, projects, agreements and plans should be implemented immediately if this region is to become the gateway to Southeast Asia.India and ASEAN: a historical perspective
When India initiated its Look East Policy in 1991, it marked a strategic shift in its foreign policy and perceptions towards its eastern neighbours. ASEAN’s strategic importance in the larger Asia-Pacific region and the potentials it has in becoming India’s major partner in trade and investment also added an impetus to India to develop closer ties with it. In addition, considering that the proposed South Asian Free Trade Area (SAFTA) is unlikely to produce any solid outcome, this policy shift and agreement on the part of India is as strategic as it is important. The Indian Prime Mister Manmohan Singh commented thus, “This was not merely an external economic policy; it was also a strategic shift in India’s vision of the world and India’s place in the evolving global economy. Most of all it was about reaching out to our civilisational neighbours in the region.”[2]
In continuance of India’s Look East Policy, the process of interregional cooperation was institutionalised with India becoming a sectoral dialogue partner of ASEAN in 1992; a full dialogue partner in 1995 and member of the ASEAN Regional Forum (ARF) in 1996. India became a summit-level partner of ASEAN in 2002 and concluded the ASEAN-India Partnership for Peace, Progress and Shared Prosperity in 2004. India also became engaged in regional initiatives such as the Mekong-Ganga Cooperation (MGC) and the Bangladesh India Myanmar Sri Lanka Thailand – Economic Cooperation which has become the awkwardly named Bay of Bengal Initiative for Multi Sectoral Technical and Economic Cooperation (BIMSTEC) with the admission of Nepal and Bhutan. India has now become a member of the East Asia Summit (EAS) since December 2005.
At the first India-ASEAN Summit held at Phnom Penh on November 5, 2001, India called for an India-ASEAN FTA within a 10-year time frame. In this context, the second India-ASEAN Summit held at Bali on October 8, 2003 was a significant landmark in India-ASEAN relations. This Summit saw the signing of the Framework Agreement for Comprehensive Economic Cooperation between India and ASEAN. This agreement envisaged the establishment of an FTA within a period of ten years. In March 2004, an ASEAN-India Trade Negotiations Committee (AI-TNC) was established to negotiate the implementation of the provisions of the Framework Agreement. India has, since then, entered into numerous agreements with ASEAN. At the sixth India-ASEAN Summit held at Singapore on November 2007, India proposed to increase its bilateral trade with ASEAN to the tune of US$ 50 billion by the year 2010.
In addition to these agreements with ASEAN, India has made consistent efforts to develop bilateral ties with ASEAN members. With Thailand, India has 61 years of diplomatic relations. India also has a Free Trade Agreement with Thailand that was signed in 2004. The framework agreement on bilateral FTA of 2003 was the basis of this FTA with Thailand. Trade between the two increased from a mere US$ 606 million to US$ 3.14 billion in 2006-2007.
With the CLV countries (Cambodia, Laos and Vietnam), India entered into a number of bilateral agreements for cooperation in the fields of trade, science and technology , agriculture, defence, visa exemption, tourism, IT and culture. India has major projects in the fields of education, entrepreneurship development and IT in these three countries. In 2004, India extended a credit line of US$ 27 million to Vietnam.
Malaysia is a major source of Foreign Direct Investment (FDI) for India, particularly in the areas of LPG, power plants and highway constructions. Trade between the two rose from US$ 2.2 billion in 2002-2003 to US$ 6.6 billion in 2006-2007. Indian public sector undertakings such as BHEL and IRCON have also undertaken and completed a number of projects in Malaysia. Presently, after the India-ASEAN FTA negotiations, it is reported that about 150 Indian engineering firms are eying to diversify their export base in ASEAN markets and are planning to make Malaysia the regional hub to penetrate the region.[3] Many of these companies are exploring the possibilities of joint ventures, technology transfers and investment opportunities.
It was mainly because of the insistence of Indonesia that India became a part of the East Asia Summit in 2005. Relations between the two had been very good for many years. Bilateral trade between the two increased by 44 per cent from 2005-2006 to 2006-2007.
India has a Comprehensive Economic Cooperation Agreement (CECA) with Singapore since 2005. This agreement included bilateral investment promotion treaty, double taxation avoidance agreement, an air services agreement and an FTA. Singapore, along with Indonesia had been an important factor for India’s inclusion into the East Asian Summit. In addition, it was Singapore’s role that paved the way for India’s association with the ARF. Singapore is the biggest source of FDI for India among ASEAN countries. During the period 2000 to 2008, the cumulative FDI of Singapore into India was worth a whooping US$ 4.35 billion. Concurrently, over two thousand Indian companies were based in Singapore.
India also has plans for a free trade area with Brunei, Indonesia and Malaysia by 2011 and with the remaining ASEAN countries by 2016. Since 1995, India had actively engaged Myanmar in trade. It has signed several agreements and MOUs including the Tripartite Maritime Agreement with Myanmar and Thailand, Border Trade Agreement and for cooperation between civilian authorities between India and Myanmar. Since 2000, a number of high level visits have taken place. During these visits, several agreements and MOUs have been signed in areas ranging from hydroelectric projects on the Chindwin River and IT cooperation to cultural exchange programmes. In the year 2003 alone, seven Agreements/MOUs were signed to promote trade and communication facilities. By 2006-2007, bilateral trade between India and Myanmar reached US$ 650 million as compared to US$ 341.40 million in 2004-2005.
The deepening of relationship between India and ASEAN is reflected in the buoyancy of trade figures between the two. During April-September 2007-2008, trade grew from US$ 15.06 billion to US$ 17.02 billion, that is, trade grew by 13 per cent. India’s Foreign Trade with ASEAN, according to the Directorate General of Commercial Intelligence and Statistics (DGCIS), is also on the rise. During the period 2005-2006 to 2006-2007, India’s exports to ASEAN registered a growth rate of 20.67 per cent. Similarly, India’s imports from ASEAN during the same period registered a growth rate of 66 per cent. India-ASEAN trade stood at US$ 38.37 billion in 2007-2008 and is projected to reach US$ 48 billion during 2008-2009.[4] Kamal Nath, the Indian Commerce minister has stated that India-ASEAN trade has reached the projected US$ 40 billion and that both are confident that the US$ 50 billion target will be achieved before the deadline of 2010.[5]The Northeast, India’s Look East Policy and India-ASEAN FTA
One early outcome of the Look East policy was the Indo-Myanmar Trade Agreement signed in 1994. According to this agreement, border trade between the two is to be conducted through Moreh in India and Tamu in Myanmar; Champhai in India and Rhi in Myanmar and other places that may be notified by mutual agreement. Several Indian companies are also engaged in oil and gas exploration in Myanmar.
In 2001, India upgraded the 160 km long Tamu-Kalewa-Kalemyo highway. Plans for a 1400 km long trans-Asian highway that will connect India, Myanmar and Thailand is now being finalised. A railway link that will extend up to Imphal in Manipur in the first phase and up to Myanmar in the second phase is also being planned. Bilateral trade between India and Myanmar has also been expanding at a significant rate since 2001. India has extended a number of general and project-specific credit lines in the last few years. Some major projects between the two, besides the ones already mentioned include the Rhi-Tiddim and Rhi-Falam Roads in Myanmar, the Kaladan Multimodal Transport Project and the Tamanthi Hydro Electric Power Project.
In 2006, the Minister of Defence MM Palam Raju had announced that India will upgrade the 7,603 Km of roads by the year 2013 to increase connectivity and to promote trade with China and Myanmar.[6]
The Kaladan Multimodal Transit-cum-Transport project agreement was signed in April 2008. Jairam Ramesh, the Minister of State for Commerce said that the Rs. 548 Crore project will help increase connectivity between the two countries. Physical work for this project is expected to begin by the end of 2009. This project will link Kolkata and Sittwe, Kaleutwa in Myanmar by road and would go through Mizoram in India. It envisages the development of a 225 km waterway on the Kaladan River and the construction of ports along the way. The minister said that north eastern India will be able to boost its border trade with Myanmar. Upgradation of ports, waterway and road from Kaleutwa to the Indo-Myanmar border is expected to be completed by 2011-2012. It is also proposed to construct a two-lane highway of 117 kilometres near Lawngtlai in Mizoram to the Myanmar border. The government, he added, will also consider opening up of trading points in Mizoram, Arunachal Pradesh and Nagaland. At present, there is only one trading point at Moreh in Manipur. This project will also help India to effectively integrate with the ASEAN region through Myanmar.[7] Plans to allow free movement of Myanmarese citizens up to Moreh town in Manipur is also afoot. The Manipur Government has also submitted a Rs. 200 Crore project proposal to the Central Government to develop infrastructure at Moreh.
In 2006, a proposal for a bus service between Imphal and Mandalay was considered and accepted by the Indian Government. But till now, no such service has been undertaken. But during the September 2008 visit of a 17-member trade delegation from Myanmar at Imphal, the Myanmar trade delegation expressed their desire to implement the proposed Imphal-Mandalay bus service definitely. This visit was a reciprocal visit after a trade delegation from Manipur visited Mandalay during the month of April 2008. After holding a series of meetings, both the sides agreed to put pressure on their respective governments to improve the existing border trade between India and Myanmar. The Indian Ambassador to Myanmar Aloke Sen said recently that this bus service proposal should be examined further.[8]
Earlier in April 2008, after the visit of a strong Myanmar official and business delegation to India, both the two countries had agreed to increase border trade that is restricted to only 22 items, all being agricultural products. There are now plans to free more items including life saving drugs, fertilizers, garments, x-ray papers and motor parts. Very recently, tradable items have been increased from the earlier 22 items to 40 items.
The latest agreement signed between India and Myanmar is the four-point economic cooperation agreement signed in June 2008. This agreement was signed by the Indian Minister for Commerce and Power Jairam Ramesh and the Myanmar Minister for National Planning and Economic Development U Soe Tha. First, the Bilateral Investment Promotion Agreement (BIPA) was signed to encourage investment between the two countries. Second, a credit line agreement between the Exim Bank of India and the Myanmar Foreign Trade Bank was signed to finance three 290 kv transmission lines in Myanmar. This US$ 64 million project will be executed by the Power Grid Corporation of India. Third, a credit line agreement for US$ 20 million between the Exim Bank of India and the Myanmar Trade Bank was signed to finance the establishment of an aluminium conductor steel reinforced wire manufacturing facility. This facility will be used for the expansion of power distribution network in Myanmar. Fourth, the United Bank of India (UBI) and the Myanmar Economic Bank signed an agreement to encourage border trade through Moreh. There are also plans to expand trade centres to include Arangkhu and Lungwa in Nagaland, Zokhawthar in Mizoram, Pangsan Pass in Arunachal Pradesh and Behiang, Skip and Tusom in Manipur.[9]
The announcement for the ASEAN-India FTA came after the conclusion of the 6th ASEAN AEM – India Consultations held at Singapore on 28 August 2008. Expectations from the India-ASEAN FTA are high. The Joint Media Statement of the Sixth ASEAN Economic Ministers (AEM)-India Consultations stated that “the AIFTA could be a major avenue in harnessing the region’s vast economic potentials towards sustained progress and improved welfare not only for ASEAN and India but for the greater East Asian region as well.” [10]
This agreement, it is expected, will bring a free trade regime to about two billion people from 11 countries with a combined GDP of $2,381 billion as of 2007. The agreement covering billions of dollars in trade in goods but not in services was supposed to have been concluded in 2007 but talks were bogged down because of differences over products that India wanted excluded from tariff cuts. India had submitted a list of 1,414 products but ASEAN’s target was only 400. In the end, the agreement permits India to have 489 products in the ‘exclusion list’ and 606 sensitive goods that will come under partial duty reductions.
This agreement is to be viewed against the backdrop of the long drawn-out Doha round of multilateral talks. As the Doha talks continue to drag on, this agreement between India and ASEAN can be seen as a natural course of action for countries refusing to entangle themselves in the protracted Doha round of talks. This agreement, along with the comprehensive FTA between ASEAN, Australia and New Zealand (AANZ FTA), became the first major trade agreement in the post-Doha era of trade policy negotiations.
The India-ASEAN FTA is also the result of recent changes in ASEAN’s policy towards its immediate neighbours and other important trading partners all over the world. In recent years, ASEAN has been involved with its major trading partners in concluding FTAs. In 1999, the ASEAN+3[11] was formed for the establishment of a common market and a currency. China was the first to conclude an FTA with ASEAN followed by Japan and South Korea. The present FTA between India and ASEAN, and the AANZ FTA completes this trend. ASEAN will now be able to strike a fine balance in trade among its immediate neighbours.
For India, this agreement will be a major milestone in its Look East Policy that began after the collapse of the erstwhile Soviet Union. The current agreement will take India far beyond its existing trade agreements with Myanmar, Thailand and Singapore.
It is in these contexts that India’s Northeast came to be seen in a new light. Myanmar, now being a member of ASEAN and having shared a 1643 km long border with India, is now becoming the major link between India and ASEAN countries. The Northeast states of India have now also been seen as the ‘gateway’ to the ASEAN countries.The Northeast States: an emerging centre for trade?
The north eastern part of India has been an area of very low economic importance for the major part of history. But changes in international relations, the search for economic expansion and free trade have suddenly exposed this neglected and isolated region to the globalised world. This area is now being called the ‘gateway’, ‘arrowhead’ and ‘centre’ of trade for India with the emerging ASEAN countries. And especially in view of the above developments, expectations from recent agreements and policies regarding the development of this region are high. It can be argued that all this began with the adoption of the Look East Policy by India. Rajiv Sikri, the Secretary East of the Ministry of External Affairs remarked that the Look East Policy “envisages the Northeast region not as the periphery of India, but as the centre of a thriving and integrated economic space linking two dynamic regions with a network of highways, railways, pipelines, transmission lines crisscrossing the region.”[12]
Indeed, the region comprising of the eight states of Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura and Sikkim is a storehouse of rich natural resources. This region is home to over 40 million people and is a potential gateway to Southeast Asia. The Minister of External Affairs, Pranab Mukherjee has also stated, “The Northeast region of India which comprises of eight states is a unique region. Accounting for roughly 8 per cent of India’s total land mass and 4 per cent of India’s population, the region is rich in both human (high literacy rate of over 65 per cent) and natural resources and has the true potential of becoming the gateway of India to ASEAN. Given the tremendous availability of natural resources and many incentives specially designed for the North East Region, it is today poised as a major growth area waiting for investment. The idea of rail and road connectivity is under examination to help increase our exchanges with ASEAN countries.”[13]
The Northeast has about 38 per cent of hydroelectric potential of India and has millions of tonnes of coal and oil reserves. Besides, it also has huge potentials for the development of paper industry, horticulture, floriculture, agriculture, food processing, information technology, paper industry, tourism, minerals and gas. A number of items that could be used for speedy growth in exports to its neighbouring countries and that have huge potentials include pineapple, passion fruit, spices, ginger, bamboo products, orange, flowers, handicrafts, tea, oil and natural gas. The region also has India’s largest perennial water transportation – the Brahmaputra River. The valley around the Brahmaputra River is fertile having huge potentials for developing and transporting agricultural products in a mass scale.Identifying potentialities
The areas of cooperation between India and its eastern neighbours cover wide ranging areas including trade and investment, tourism, human resources development, transport and infrastructure, small and medium scale enterprise, science and technology and people-to-people contacts in terms of sectors. In trade in goods, India’s exports to ASEAN include oil, meals, gems and jewellery, meat and meat preparations, cotton yarn, fabrics, made-ups, engineering goods, transport equipment, machinery and instruments, electronic goods, marine products, fruits and vegetables, rice, drugs and pharmaceuticals, chemicals etc. while its imports from ASEAN include artificial resins, plastic materials, natural rubber, wood and wood products, electronic goods, non-ferrous metals, metaliferous ores and metal scrap, organic chemicals, edible oils, coal, fertilisers etc. ASEAN countries are also undertaking Foreign Direct Investment (FDI) in India, mostly in telecommunications, fuels, hotel and tourism services, heavy industry, chemicals, fertilisers, trading, textiles, paper and paper pulp and food processing.
In terms of hydroelectric energy, this region has a very big potential. It has almost 40 per cent of India’s total hydroelectric potential out of which less than 2 per cent has been harnessed. This potential is estimated to be about 58971 MW.[14] There are several hundred hydroelectric projects in the Northeast. Besides hydroelectricity, the region also has huge natural gas, coal and oil reserves. Such potential and reserves, if planned and harnessed properly and used in the proper ways could alleviate the present condition of the people of this region. It could also be an important leverage for the region in trade with its neighbours.
The economy of the Northeast is mainly agrarian and mostly poor. But this region offers big scope for the production of a wide variety of crops because of the diverse topography, altitude and climatic conditions. Such products, if developed properly, could be made good use of for mass production and for trade. Mushroom, ginger, pineapple, passion fruit, rubber, spices, orchids, chilli pepper, bamboo products, exotic plants, aromatic herbs, medicinal plants and other rare forest products of Northeast India could constitute the bulk of trade. For the state of Mizoram, ginger, which has constituted the bulk of its exports could be put under better scientific management not only for international exports, but also for exports to other states of India. The high quality pineapples of Cachar must also come under proper and scientific management so that it can bring about employment to the many pineapple farmers of this particular region.

STATE-WISE PRODUCTION OF TEA

States

2000

2001

2002

2003

2004

2005

2006

2007

Assam

449219

453587

433327

434759

435649

487487

502041

479925

Tripura

6431

6506

6632

8577

7168

7515

7128

-

Manipur

96

101

100

119

110

108

110

-

Sikkim

105

110

81

107

150

157

167

13329

Arunachal Pradesh

993

1047

950

1745

2219

2624

3748

-

Nagaland

43

75

206

195

190

190

191

-

Meghalaya

140

41

35

81

99

99

139

-

Mizoram

39

41

45

78

72

73

75

-

All India

846922

853923

838474

878129

892965

945974

981805

944678

Source:Tea Board, Guwahati

One important Northeast product that could have deep impact on the economy and trade is tea. Tea, along with coffee is widely cultivated in the Northeast. Although tea is mostly grown in Assam and Tripura, in recent years, Arunachal Pradesh, Nagaland and Manipur have also started producing tea. In recent years, the tea industry has seen remarkable expansion. In fact, about 77 per cent of Indian tea is contributed by the eight states of Northeast India.[15] Assam itself accounts for nearly 53 per cent of the all India production.[16] The Ministry of Commerce, Government of India has planned to cover an area of about 1 lakh ha in this region for re-plantation/rejuvenation under the Special Purpose Tea Fund (SPTF) over the next 15 years with an estimated investment of 2500 crores and over 8000 ha for new plantation within the 11th Plan period with an outlay of 42 crores which will be confined only to the hilly areas.[17] The government is also engaged to develop coffee production in the Northeast with an outlay of about 20 crores within the 11th Plan period. The Coffee Board has also established five coffee demonstration farms at Haflong (Assam), Kolasib (Mizoram), Deomali (Arunachal Pradesh), Kiruphema (Nagaland) and Agartala (Tripura). Tea plantations have begun in many parts of the Northeast states; and if the plans are to be pursued wholeheartedly, it would greatly help in making this region a major tea exporter of not only Asia, but also of the world.
An important thrust area for development and trade in the Northeast has been the tourism sector. The Government of India and the Ministry of the Development of Northeastern Region (DoNER) have identified tourism as an important trade link between Northeast India and Southeast Asia. At the recently concluded Northeast India Business and Trade Opportunities Summit held at Ho Chi Minh City, Jarnail Singh, the DoNER Secretary stated, “Tourism is the most effective way to increase the still negligible trade between India’s northeastern region and Vietnam.”[18] The rich natural beauty, exotic flora and fauna and serenity of the region are expected to invite more tourists if the relations between India and its eastern neighbours continue to improve. The government has also taken several steps to improve tourist facilities in the Northeast. During the Ninth Five Year Plan, some of the thrust areas in this sector included – development of infrastructure, trekking, winter sports, wildlife and beach resorts; exploration of new source markets in regions and countries having cultural affinity; environmental protection and cultural preservation of natural heritage projects; marketing plan in key markets; provision of inexpensive accommodation in different tourist centres; improvement in service efficiency in public sector corporations; easy facilitation of procedures at airports; human resource development; facilitation private sector participation in development of infrastructure. This is one sector where the Northeast has immense potential for.

But if we look at the table, it can be seen that the flow of tourists in this region is quite limited so far. There are several issues such as the Inner Line Permit (ILP) regime that has to be sorted out first. To navigate between those who held that the ILP protects the indigenous people and those who state that it badly affects trade and tourism in the Northeast becomes another hurdle to be overcome as indicated by the recent furore caused by the ruling of the Guwahati High Court.[19]The problems
The potentials the Northeast offers are huge. But most of this potential remains untapped because of the very poor physical infrastructures of the region. Except perhaps Assam, all other Northeast states do not have necessary industrial infrastructures. Most products remain localised. The use of machinery and other modern tools remain confined to very few areas of the Northeast. The growth of industries is also uneven even between the states. It is therefore imperative to establish small to medium sized industries in the first phase to begin harnessing this potential in as much viable centres as possible. The Indian government has also taken several steps towards this direction, but most of these steps remain in paper.
For a very long time, the northeast states have not seen much improvement in the condition of the roads and other transport networks. This poor transport infrastructure is a big problem for trade in this region. The rail network is limited because of the topography. For some time now, plans have been made to upgrade, build and rebuild roads all over the Northeast but it can be seen that the plans have not been implemented on a war footing. Remote areas remain remote and inaccessible villages remain inaccessible. The plans to connect India, Myanmar and Thailand (trans-Asia highway), the planned railway link between India and Myanmar, the Rhi-Tiddim and Rhi-Falam roads, the Kaladan Multimodal Transport Project and the proposed bus service are still in their infancy at this stage. 1,310 Km of the plan announced by the Defence Minister in 2006 is supposed to have been completed by this year (2009). No one knows where the upgraded 1,310 Km road runs through now. Therefore, the upgradation of transport facilities and the development of roads, rail, river and air transport has become the need of the hour in the face of recent developments.
If we examine the markets, trade items and products between India and ASEAN, it can be seen that many of the trade items are products from mainland India and not from the Northeast. This was because of the low productivity level in the region. It therefore becomes quite difficult to identify the potential Northeast products for export into ASEAN as the region produces too little tradable items presently. Even for those items that can be traded, the volume is too small to be traded internationally. As the region remains underdeveloped in all sectors, the potentials that it has becomes limited once again. A vicious cycle of underdevelopment, low productivity levels and isolation thus occurs here.
A problem that most developing countries face in regional trade is that they produce the same primary goods limiting the scope of any trade-led developments. In our case, many of the products which we find in the Northeast, notwithstanding its small volume, are also produced in ASEAN countries. For example, tea is also produced in ASEAN countries especially in Vietnam and Indonesia. In fact, Vietnam produces tea, coffee, rubber and fish and is one of the largest producers in the world. As for rice, Thailand is the second largest exporter of rice in the world with Vietnam coming second. Indonesia is also a major producer of coffee. The direction of trade for tea plantations in Assam and other states of the Northeast becomes quite difficult to navigate.
One glaring problem for trade in this region is topographical. The mountain ranges, thick jungles and winding river networks make this place hard to access and hard to develop to make it a proper linkage and centre. This is worsened by the poor surface and air transport system. The geographical feature of this region also hampers the development of the transport system. But the blame cannot and should not be laid on this alone.
Even though it can be seen that there have been changes in the policy of the government towards the Northeast during the past few years, for a very long time the policy of the government towards the Northeast was shaped by its security concerns. This remains a serious inhibitor to investment from major companies or neighbours. Indeed, the porous borders and the many insurgent groups in Northeast India are to be matters of concern for the security establishment. And in spite of India’s improving relations with Myanmar, the growing power of the military junta in this country could also remain a hurdle for India and the ASEAN countries in their pursuit of freer border trade. This could in turn also affect the Northeast states. If this becomes a hurdle, then India would have to conduct its businesses through the sea route. The future of the Northeast states will then remain unsure once again. An important point to note is that although trade performance has improved with India’s eastern neighbours over the years till now, many of these exchanges had been done without the Northeast states playing important roles. Most of the volume of trade has so far been conducted through the sea routes bypassing the Northeast states. In fact, only Moreh trade centre in Manipur is functioning out of the several trade centres proposed and planned. But then, looking at everything from the security point of view is also bound to constrain economic development opportunities. A fine balance between security, economics and politics should be maintained so that the roots of all the problems in the Northeast can be done away with.
The weakness of the forces of production, poor infrastructural facilities and technology in addition to the underdeveloped transport and communication routes have also hampered productivity and trade within the region. While labour is quite plentiful, there is also the lack of skilled labour. Therefore, while trade between India and ASEAN has remained buoyant for some years now, its impact has not been felt in the Northeast so far. The infrastructural facilities, transport and communication and trade centres have not been developed enough to let the Northeast states become the centre of trade between them. Among the notified and approved trade centres in the Northeast, till now, only Moreh trade centre in Manipur is functioning while at the trade centre of Zokhawthar in Mizoram, very informal trade has started. Even here, trade remains insignificant. Steps have to be taken to renovate and build new buildings and other structures in this trade centre. Recently, tradable items between India and Myanmar at Moreh had been increased to 40 items from the previous 22 items. But the bilateral trade between India and Myanmar do not extend much beyond granting formal sanctions to the already existing exchanges between the local people. In effect, border trade remains insignificant and did not contribute much towards economic growth for neither country. The trade centre at Zokhawthar in Mizoram is still not regulated well enough as some local reports have mentioned problems that have arisen due to the high transport costs of goods brought from this centre to the state capital. The transportations of the goods are allegedly undertaken by the Zokhawthar Welfare Committee and the Champhai Transport Union.[20] The Indian Ambassador to Myanmar Alok Sen was quoted to having said, “it is hard to say if Mizoram state and India will profit from border trade, because the activity is still very much informal.”[21]Concluding remarks
It is understood that the Northeast states have huge potentials for growth, development and for trade. It is also known that these states are an important link, a ‘gateway’ to Southeast Asia. It is again known that the physical infrastructures are so poor and that this region cannot properly become the centre trade for India with its eastern neighbours. But what has been done to solve all these? We have seen the many plans and proposals for development and some of the works that have been done. These, certainly, are still not enough; and we all know this first hand.
For trade and commerce to flourish, the entire network of transport and communication, industries and agriculture throughout the Northeast also needs to be revamped and developed. If the northeast is to benefit from any improved trade relations or any present or future FTAs, the numerous plans and proposals that has been put forth and are in paper only must be implemented and brought to fruition first. The very few roles that the northeast states are playing right now should also be promoted to a more central role. In order to undertake any development projects for trade in Northeast India, it is imperative that the civil society and the government work hand in hand.
In a nutshell, Northeast India, a storehouse of great natural resources but very backward economically, needs to be built up and readied if it is really going to be the ‘gateway’, ‘arrowhead’ or ‘centre’ of trade between India and East Asia. Unless the region is developed to catch up with the rest of the country in its growth rate and development, it will be hard to achieve what the people aspired for – peace, security, prosperity and all round development. To make this possible, substantial investment in infrastructure, construction of roads, bridges, communication networks, harnessing of the region’s vast natural resources and other physical infrastructures that will facilitate trade and economic progress needs to be developed. The prism of security through which policy makers have been looking at the Northeast states also need to be changed to one that mirrors a more optimistic side of this beautiful region – the Northeast.
The Indian government also concedes that the Northeast has a long way to go to achieve the national growth rate of nearly 9 per cent. The growth rate of Northeast is only 4 per cent. Increasing the growth rate and economy of this region will be an important step because herein lies many solutions to some pressing political and security problems.REFERENCES
WTO (1995), Regionalism and the World Trading Systems, Geneva: WTO.
World Bank (2000), Trade Blocks, Oxford: OUP.[1] ASEAN was formed in 1967. Thailand, Indonesia, Malaysia, Singapore and the Philippines constituted the five original members. Brunei became a full member in 1984; Vietnam in 1995; Laos and Myanmar in 1997; and Cambodia in 1999. [2] Prime Minister Dr. Manmohan Singh’s address at the 16th Asian Corporate Conference driving global business: India’s new priorities, Asia’s new realities. URL: http://www.indianembassy.org/newsite/press_release/2006/Mar/35.asp[3] http://www.bernama.com/bernama/v3/news_business.php?id=351756[4] India’s trade statistics and other commercial information can be had from the DGCIS website at http://dgciskol.nic.in[5] http://www.aseanaffairs.com/india_s_engagement_with_asean[6] http://www.india-defence.com/reports/2682[7] http://www.financialexpress.com/news/India-Myanmar-expects-Kaladan-project-to-increase-border-trade/292285/[8] http://www.telegraphindia.com/1090411/jsp/northeast/story_10804322.jsp[9] See http://commerce.nic.in/PressRelease/pressrelease_detail.asp?id=2280[10] http://www.aseansec.org/21895.htm[11] ASEAN+3 include ASEAN, China, Japan and South Korea.[12] http://telegraphindia.com/1050412/asp/opinion/story_4590622.asp also see http://meaindia.nic.in/speech/2005/05/31ss02.htm[13] http://www.aseanaffairs.com/india_s_engagement_with_asean[14] http://neepco.gov.in/neepco6.html[15] http://databank.nedfi.com/content/tea-2[16] http://mdoner.gov.in/index2.asp?sid=129[17] http://commerce.nic.in/publications/anualreport_chapter14.asp[18] http://ne.icrindia.org/2009/02/18/tourism-identified-as-trade-link-between-ne-india-and-se-asia/[19]See http://kaladan.com/390/inner-line-permit-ilp-issue-causes-furore-in-northeast/[20] http://aizawl.org/home/5-mizoram-news/1691-zokhawthar-border-trade-enfiah-dawn[21] http://mizzima.com/news/regional/1956-indian-ambassador-to-burma-discusses-border-trade-with-mizoram.html
Northeast States of India and the emerging ASEAN economic powerhouses
This paper was prepared by Dr. James R. Ruolngulfor presentation at a seminar on ASEAN markets at Mizoram Universityin 2009. It was accepted. But unfortunately, due to some unexpected and unavoidable difficulties, the author could not attend the seminar.

Abstract________________________The Northeast states of India have become increasingly important in an increasingly globalised world. With its immense resources and potentials, this region is poised to become the ‘gateway’ of an emerging trade between India and Southeast Asia. With recent developments, and especially with the India-ASEAN FTA, this region has come to be seen in a new light. This article explores the possibilities and potential products for trade, the infrastructural facilities, the multifarious problems and the necessary steps to be taken for trade led developments to occur in the region. Introduction
The growth of Regional Trade Agreements (RTA) has been one of the most significant developments in contemporary international relations. This trend towards freer trade and RTAs has accelerated particularly after the Cold War ended. Out of the 108 RTAs notified to the General Agreements on Tariffs and Trade (GATT) over the period 1948-1994, thirty three of them were established in the early 1990s. By the year 2000, almost half of the 220 RTAs notified to the World Trade Organisation (WTO) were initiated after the Cold War (WTO 1995; World Bank 2000: 1). As of March 2009, 184 RTAs have been notified to the WTO and are in force. Currently, there are also several RTAs soon to come into force. The ASEAN-India Free Trade Area (AIFTA) is one among them. Negotiations for this FTA have already been completed and is expected to be signed very soon if all goes well. This is one FTA that could have an important impact on the Northeast states of India in the face of the increasingly closer economic ties and relations between India and its eastern neighbours.
This paper is an attempt to explore trade, examine infrastructural facilities and identify potentials and examine problems for trade-led development for ASEAN[1] and the Northeast states of India in the face of an increasingly globalised world and in the context of the current AIFTA. The paper looks into the beginning of the improved relations between India and ASEAN and investigates how this improved relation affects the Northeast states. It then focuses on the resources and potentials of the Northeast and examines the infrastructure and the problems and constraints for trade-led development in this region. It argues that while the Northeast is truly a storehouse of innumerable wealth with huge potentials to become the centre of trade between India and ASEAN, the poor physical infrastructure, uneven growth rate, absence of proper transport and communications and policies brought about by security concerns keeps this region behind other regions of India. It also argues that the many proposals, projects, agreements and plans should be implemented immediately if this region is to become the gateway to Southeast Asia.India and ASEAN: a historical perspective
When India initiated its Look East Policy in 1991, it marked a strategic shift in its foreign policy and perceptions towards its eastern neighbours. ASEAN’s strategic importance in the larger Asia-Pacific region and the potentials it has in becoming India’s major partner in trade and investment also added an impetus to India to develop closer ties with it. In addition, considering that the proposed South Asian Free Trade Area (SAFTA) is unlikely to produce any solid outcome, this policy shift and agreement on the part of India is as strategic as it is important. The Indian Prime Mister Manmohan Singh commented thus, “This was not merely an external economic policy; it was also a strategic shift in India’s vision of the world and India’s place in the evolving global economy. Most of all it was about reaching out to our civilisational neighbours in the region.”[2]
In continuance of India’s Look East Policy, the process of interregional cooperation was institutionalised with India becoming a sectoral dialogue partner of ASEAN in 1992; a full dialogue partner in 1995 and member of the ASEAN Regional Forum (ARF) in 1996. India became a summit-level partner of ASEAN in 2002 and concluded the ASEAN-India Partnership for Peace, Progress and Shared Prosperity in 2004. India also became engaged in regional initiatives such as the Mekong-Ganga Cooperation (MGC) and the Bangladesh India Myanmar Sri Lanka Thailand – Economic Cooperation which has become the awkwardly named Bay of Bengal Initiative for Multi Sectoral Technical and Economic Cooperation (BIMSTEC) with the admission of Nepal and Bhutan. India has now become a member of the East Asia Summit (EAS) since December 2005.
At the first India-ASEAN Summit held at Phnom Penh on November 5, 2001, India called for an India-ASEAN FTA within a 10-year time frame. In this context, the second India-ASEAN Summit held at Bali on October 8, 2003 was a significant landmark in India-ASEAN relations. This Summit saw the signing of the Framework Agreement for Comprehensive Economic Cooperation between India and ASEAN. This agreement envisaged the establishment of an FTA within a period of ten years. In March 2004, an ASEAN-India Trade Negotiations Committee (AI-TNC) was established to negotiate the implementation of the provisions of the Framework Agreement. India has, since then, entered into numerous agreements with ASEAN. At the sixth India-ASEAN Summit held at Singapore on November 2007, India proposed to increase its bilateral trade with ASEAN to the tune of US$ 50 billion by the year 2010.
In addition to these agreements with ASEAN, India has made consistent efforts to develop bilateral ties with ASEAN members. With Thailand, India has 61 years of diplomatic relations. India also has a Free Trade Agreement with Thailand that was signed in 2004. The framework agreement on bilateral FTA of 2003 was the basis of this FTA with Thailand. Trade between the two increased from a mere US$ 606 million to US$ 3.14 billion in 2006-2007.
With the CLV countries (Cambodia, Laos and Vietnam), India entered into a number of bilateral agreements for cooperation in the fields of trade, science and technology , agriculture, defence, visa exemption, tourism, IT and culture. India has major projects in the fields of education, entrepreneurship development and IT in these three countries. In 2004, India extended a credit line of US$ 27 million to Vietnam.
Malaysia is a major source of Foreign Direct Investment (FDI) for India, particularly in the areas of LPG, power plants and highway constructions. Trade between the two rose from US$ 2.2 billion in 2002-2003 to US$ 6.6 billion in 2006-2007. Indian public sector undertakings such as BHEL and IRCON have also undertaken and completed a number of projects in Malaysia. Presently, after the India-ASEAN FTA negotiations, it is reported that about 150 Indian engineering firms are eying to diversify their export base in ASEAN markets and are planning to make Malaysia the regional hub to penetrate the region.[3] Many of these companies are exploring the possibilities of joint ventures, technology transfers and investment opportunities.
It was mainly because of the insistence of Indonesia that India became a part of the East Asia Summit in 2005. Relations between the two had been very good for many years. Bilateral trade between the two increased by 44 per cent from 2005-2006 to 2006-2007.
India has a Comprehensive Economic Cooperation Agreement (CECA) with Singapore since 2005. This agreement included bilateral investment promotion treaty, double taxation avoidance agreement, an air services agreement and an FTA. Singapore, along with Indonesia had been an important factor for India’s inclusion into the East Asian Summit. In addition, it was Singapore’s role that paved the way for India’s association with the ARF. Singapore is the biggest source of FDI for India among ASEAN countries. During the period 2000 to 2008, the cumulative FDI of Singapore into India was worth a whooping US$ 4.35 billion. Concurrently, over two thousand Indian companies were based in Singapore.
India also has plans for a free trade area with Brunei, Indonesia and Malaysia by 2011 and with the remaining ASEAN countries by 2016. Since 1995, India had actively engaged Myanmar in trade. It has signed several agreements and MOUs including the Tripartite Maritime Agreement with Myanmar and Thailand, Border Trade Agreement and for cooperation between civilian authorities between India and Myanmar. Since 2000, a number of high level visits have taken place. During these visits, several agreements and MOUs have been signed in areas ranging from hydroelectric projects on the Chindwin River and IT cooperation to cultural exchange programmes. In the year 2003 alone, seven Agreements/MOUs were signed to promote trade and communication facilities. By 2006-2007, bilateral trade between India and Myanmar reached US$ 650 million as compared to US$ 341.40 million in 2004-2005.
The deepening of relationship between India and ASEAN is reflected in the buoyancy of trade figures between the two. During April-September 2007-2008, trade grew from US$ 15.06 billion to US$ 17.02 billion, that is, trade grew by 13 per cent. India’s Foreign Trade with ASEAN, according to the Directorate General of Commercial Intelligence and Statistics (DGCIS), is also on the rise. During the period 2005-2006 to 2006-2007, India’s exports to ASEAN registered a growth rate of 20.67 per cent. Similarly, India’s imports from ASEAN during the same period registered a growth rate of 66 per cent. India-ASEAN trade stood at US$ 38.37 billion in 2007-2008 and is projected to reach US$ 48 billion during 2008-2009.[4] Kamal Nath, the Indian Commerce minister has stated that India-ASEAN trade has reached the projected US$ 40 billion and that both are confident that the US$ 50 billion target will be achieved before the deadline of 2010.[5]The Northeast, India’s Look East Policy and India-ASEAN FTA
One early outcome of the Look East policy was the Indo-Myanmar Trade Agreement signed in 1994. According to this agreement, border trade between the two is to be conducted through Moreh in India and Tamu in Myanmar; Champhai in India and Rhi in Myanmar and other places that may be notified by mutual agreement. Several Indian companies are also engaged in oil and gas exploration in Myanmar.
In 2001, India upgraded the 160 km long Tamu-Kalewa-Kalemyo highway. Plans for a 1400 km long trans-Asian highway that will connect India, Myanmar and Thailand is now being finalised. A railway link that will extend up to Imphal in Manipur in the first phase and up to Myanmar in the second phase is also being planned. Bilateral trade between India and Myanmar has also been expanding at a significant rate since 2001. India has extended a number of general and project-specific credit lines in the last few years. Some major projects between the two, besides the ones already mentioned include the Rhi-Tiddim and Rhi-Falam Roads in Myanmar, the Kaladan Multimodal Transport Project and the Tamanthi Hydro Electric Power Project.
In 2006, the Minister of Defence MM Palam Raju had announced that India will upgrade the 7,603 Km of roads by the year 2013 to increase connectivity and to promote trade with China and Myanmar.[6]
The Kaladan Multimodal Transit-cum-Transport project agreement was signed in April 2008. Jairam Ramesh, the Minister of State for Commerce said that the Rs. 548 Crore project will help increase connectivity between the two countries. Physical work for this project is expected to begin by the end of 2009. This project will link Kolkata and Sittwe, Kaleutwa in Myanmar by road and would go through Mizoram in India. It envisages the development of a 225 km waterway on the Kaladan River and the construction of ports along the way. The minister said that north eastern India will be able to boost its border trade with Myanmar. Upgradation of ports, waterway and road from Kaleutwa to the Indo-Myanmar border is expected to be completed by 2011-2012. It is also proposed to construct a two-lane highway of 117 kilometres near Lawngtlai in Mizoram to the Myanmar border. The government, he added, will also consider opening up of trading points in Mizoram, Arunachal Pradesh and Nagaland. At present, there is only one trading point at Moreh in Manipur. This project will also help India to effectively integrate with the ASEAN region through Myanmar.[7] Plans to allow free movement of Myanmarese citizens up to Moreh town in Manipur is also afoot. The Manipur Government has also submitted a Rs. 200 Crore project proposal to the Central Government to develop infrastructure at Moreh.
In 2006, a proposal for a bus service between Imphal and Mandalay was considered and accepted by the Indian Government. But till now, no such service has been undertaken. But during the September 2008 visit of a 17-member trade delegation from Myanmar at Imphal, the Myanmar trade delegation expressed their desire to implement the proposed Imphal-Mandalay bus service definitely. This visit was a reciprocal visit after a trade delegation from Manipur visited Mandalay during the month of April 2008. After holding a series of meetings, both the sides agreed to put pressure on their respective governments to improve the existing border trade between India and Myanmar. The Indian Ambassador to Myanmar Aloke Sen said recently that this bus service proposal should be examined further.[8]
Earlier in April 2008, after the visit of a strong Myanmar official and business delegation to India, both the two countries had agreed to increase border trade that is restricted to only 22 items, all being agricultural products. There are now plans to free more items including life saving drugs, fertilizers, garments, x-ray papers and motor parts. Very recently, tradable items have been increased from the earlier 22 items to 40 items.
The latest agreement signed between India and Myanmar is the four-point economic cooperation agreement signed in June 2008. This agreement was signed by the Indian Minister for Commerce and Power Jairam Ramesh and the Myanmar Minister for National Planning and Economic Development U Soe Tha. First, the Bilateral Investment Promotion Agreement (BIPA) was signed to encourage investment between the two countries. Second, a credit line agreement between the Exim Bank of India and the Myanmar Foreign Trade Bank was signed to finance three 290 kv transmission lines in Myanmar. This US$ 64 million project will be executed by the Power Grid Corporation of India. Third, a credit line agreement for US$ 20 million between the Exim Bank of India and the Myanmar Trade Bank was signed to finance the establishment of an aluminium conductor steel reinforced wire manufacturing facility. This facility will be used for the expansion of power distribution network in Myanmar. Fourth, the United Bank of India (UBI) and the Myanmar Economic Bank signed an agreement to encourage border trade through Moreh. There are also plans to expand trade centres to include Arangkhu and Lungwa in Nagaland, Zokhawthar in Mizoram, Pangsan Pass in Arunachal Pradesh and Behiang, Skip and Tusom in Manipur.[9]
The announcement for the ASEAN-India FTA came after the conclusion of the 6th ASEAN AEM – India Consultations held at Singapore on 28 August 2008. Expectations from the India-ASEAN FTA are high. The Joint Media Statement of the Sixth ASEAN Economic Ministers (AEM)-India Consultations stated that “the AIFTA could be a major avenue in harnessing the region’s vast economic potentials towards sustained progress and improved welfare not only for ASEAN and India but for the greater East Asian region as well.” [10]
This agreement, it is expected, will bring a free trade regime to about two billion people from 11 countries with a combined GDP of $2,381 billion as of 2007. The agreement covering billions of dollars in trade in goods but not in services was supposed to have been concluded in 2007 but talks were bogged down because of differences over products that India wanted excluded from tariff cuts. India had submitted a list of 1,414 products but ASEAN’s target was only 400. In the end, the agreement permits India to have 489 products in the ‘exclusion list’ and 606 sensitive goods that will come under partial duty reductions.
This agreement is to be viewed against the backdrop of the long drawn-out Doha round of multilateral talks. As the Doha talks continue to drag on, this agreement between India and ASEAN can be seen as a natural course of action for countries refusing to entangle themselves in the protracted Doha round of talks. This agreement, along with the comprehensive FTA between ASEAN, Australia and New Zealand (AANZ FTA), became the first major trade agreement in the post-Doha era of trade policy negotiations.
The India-ASEAN FTA is also the result of recent changes in ASEAN’s policy towards its immediate neighbours and other important trading partners all over the world. In recent years, ASEAN has been involved with its major trading partners in concluding FTAs. In 1999, the ASEAN+3[11] was formed for the establishment of a common market and a currency. China was the first to conclude an FTA with ASEAN followed by Japan and South Korea. The present FTA between India and ASEAN, and the AANZ FTA completes this trend. ASEAN will now be able to strike a fine balance in trade among its immediate neighbours.
For India, this agreement will be a major milestone in its Look East Policy that began after the collapse of the erstwhile Soviet Union. The current agreement will take India far beyond its existing trade agreements with Myanmar, Thailand and Singapore.
It is in these contexts that India’s Northeast came to be seen in a new light. Myanmar, now being a member of ASEAN and having shared a 1643 km long border with India, is now becoming the major link between India and ASEAN countries. The Northeast states of India have now also been seen as the ‘gateway’ to the ASEAN countries.The Northeast States: an emerging centre for trade?
The north eastern part of India has been an area of very low economic importance for the major part of history. But changes in international relations, the search for economic expansion and free trade have suddenly exposed this neglected and isolated region to the globalised world. This area is now being called the ‘gateway’, ‘arrowhead’ and ‘centre’ of trade for India with the emerging ASEAN countries. And especially in view of the above developments, expectations from recent agreements and policies regarding the development of this region are high. It can be argued that all this began with the adoption of the Look East Policy by India. Rajiv Sikri, the Secretary East of the Ministry of External Affairs remarked that the Look East Policy “envisages the Northeast region not as the periphery of India, but as the centre of a thriving and integrated economic space linking two dynamic regions with a network of highways, railways, pipelines, transmission lines crisscrossing the region.”[12]
Indeed, the region comprising of the eight states of Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura and Sikkim is a storehouse of rich natural resources. This region is home to over 40 million people and is a potential gateway to Southeast Asia. The Minister of External Affairs, Pranab Mukherjee has also stated, “The Northeast region of India which comprises of eight states is a unique region. Accounting for roughly 8 per cent of India’s total land mass and 4 per cent of India’s population, the region is rich in both human (high literacy rate of over 65 per cent) and natural resources and has the true potential of becoming the gateway of India to ASEAN. Given the tremendous availability of natural resources and many incentives specially designed for the North East Region, it is today poised as a major growth area waiting for investment. The idea of rail and road connectivity is under examination to help increase our exchanges with ASEAN countries.”[13]
The Northeast has about 38 per cent of hydroelectric potential of India and has millions of tonnes of coal and oil reserves. Besides, it also has huge potentials for the development of paper industry, horticulture, floriculture, agriculture, food processing, information technology, paper industry, tourism, minerals and gas. A number of items that could be used for speedy growth in exports to its neighbouring countries and that have huge potentials include pineapple, passion fruit, spices, ginger, bamboo products, orange, flowers, handicrafts, tea, oil and natural gas. The region also has India’s largest perennial water transportation – the Brahmaputra River. The valley around the Brahmaputra River is fertile having huge potentials for developing and transporting agricultural products in a mass scale.Identifying potentialities
The areas of cooperation between India and its eastern neighbours cover wide ranging areas including trade and investment, tourism, human resources development, transport and infrastructure, small and medium scale enterprise, science and technology and people-to-people contacts in terms of sectors. In trade in goods, India’s exports to ASEAN include oil, meals, gems and jewellery, meat and meat preparations, cotton yarn, fabrics, made-ups, engineering goods, transport equipment, machinery and instruments, electronic goods, marine products, fruits and vegetables, rice, drugs and pharmaceuticals, chemicals etc. while its imports from ASEAN include artificial resins, plastic materials, natural rubber, wood and wood products, electronic goods, non-ferrous metals, metaliferous ores and metal scrap, organic chemicals, edible oils, coal, fertilisers etc. ASEAN countries are also undertaking Foreign Direct Investment (FDI) in India, mostly in telecommunications, fuels, hotel and tourism services, heavy industry, chemicals, fertilisers, trading, textiles, paper and paper pulp and food processing.
In terms of hydroelectric energy, this region has a very big potential. It has almost 40 per cent of India’s total hydroelectric potential out of which less than 2 per cent has been harnessed. This potential is estimated to be about 58971 MW.[14] There are several hundred hydroelectric projects in the Northeast. Besides hydroelectricity, the region also has huge natural gas, coal and oil reserves. Such potential and reserves, if planned and harnessed properly and used in the proper ways could alleviate the present condition of the people of this region. It could also be an important leverage for the region in trade with its neighbours.
The economy of the Northeast is mainly agrarian and mostly poor. But this region offers big scope for the production of a wide variety of crops because of the diverse topography, altitude and climatic conditions. Such products, if developed properly, could be made good use of for mass production and for trade. Mushroom, ginger, pineapple, passion fruit, rubber, spices, orchids, chilli pepper, bamboo products, exotic plants, aromatic herbs, medicinal plants and other rare forest products of Northeast India could constitute the bulk of trade. For the state of Mizoram, ginger, which has constituted the bulk of its exports could be put under better scientific management not only for international exports, but also for exports to other states of India. The high quality pineapples of Cachar must also come under proper and scientific management so that it can bring about employment to the many pineapple farmers of this particular region.

STATE-WISE PRODUCTION OF TEA

States

2000

2001

2002

2003

2004

2005

2006

2007

Assam

449219

453587

433327

434759

435649

487487

502041

479925

Tripura

6431

6506

6632

8577

7168

7515

7128

-

Manipur

96

101

100

119

110

108

110

-

Sikkim

105

110

81

107

150

157

167

13329

Arunachal Pradesh

993

1047

950

1745

2219

2624

3748

-

Nagaland

43

75

206

195

190

190

191

-

Meghalaya

140

41

35

81

99

99

139

-

Mizoram

39

41

45

78

72

73

75

-

All India

846922

853923

838474

878129

892965

945974

981805

944678

Source:Tea Board, Guwahati

One important Northeast product that could have deep impact on the economy and trade is tea. Tea, along with coffee is widely cultivated in the Northeast. Although tea is mostly grown in Assam and Tripura, in recent years, Arunachal Pradesh, Nagaland and Manipur have also started producing tea. In recent years, the tea industry has seen remarkable expansion. In fact, about 77 per cent of Indian tea is contributed by the eight states of Northeast India.[15] Assam itself accounts for nearly 53 per cent of the all India production.[16] The Ministry of Commerce, Government of India has planned to cover an area of about 1 lakh ha in this region for re-plantation/rejuvenation under the Special Purpose Tea Fund (SPTF) over the next 15 years with an estimated investment of 2500 crores and over 8000 ha for new plantation within the 11th Plan period with an outlay of 42 crores which will be confined only to the hilly areas.[17] The government is also engaged to develop coffee production in the Northeast with an outlay of about 20 crores within the 11th Plan period. The Coffee Board has also established five coffee demonstration farms at Haflong (Assam), Kolasib (Mizoram), Deomali (Arunachal Pradesh), Kiruphema (Nagaland) and Agartala (Tripura). Tea plantations have begun in many parts of the Northeast states; and if the plans are to be pursued wholeheartedly, it would greatly help in making this region a major tea exporter of not only Asia, but also of the world.
An important thrust area for development and trade in the Northeast has been the tourism sector. The Government of India and the Ministry of the Development of Northeastern Region (DoNER) have identified tourism as an important trade link between Northeast India and Southeast Asia. At the recently concluded Northeast India Business and Trade Opportunities Summit held at Ho Chi Minh City, Jarnail Singh, the DoNER Secretary stated, “Tourism is the most effective way to increase the still negligible trade between India’s northeastern region and Vietnam.”[18] The rich natural beauty, exotic flora and fauna and serenity of the region are expected to invite more tourists if the relations between India and its eastern neighbours continue to improve. The government has also taken several steps to improve tourist facilities in the Northeast. During the Ninth Five Year Plan, some of the thrust areas in this sector included – development of infrastructure, trekking, winter sports, wildlife and beach resorts; exploration of new source markets in regions and countries having cultural affinity; environmental protection and cultural preservation of natural heritage projects; marketing plan in key markets; provision of inexpensive accommodation in different tourist centres; improvement in service efficiency in public sector corporations; easy facilitation of procedures at airports; human resource development; facilitation private sector participation in development of infrastructure. This is one sector where the Northeast has immense potential for.

But if we look at the table, it can be seen that the flow of tourists in this region is quite limited so far. There are several issues such as the Inner Line Permit (ILP) regime that has to be sorted out first. To navigate between those who held that the ILP protects the indigenous people and those who state that it badly affects trade and tourism in the Northeast becomes another hurdle to be overcome as indicated by the recent furore caused by the ruling of the Guwahati High Court.[19]The problems
The potentials the Northeast offers are huge. But most of this potential remains untapped because of the very poor physical infrastructures of the region. Except perhaps Assam, all other Northeast states do not have necessary industrial infrastructures. Most products remain localised. The use of machinery and other modern tools remain confined to very few areas of the Northeast. The growth of industries is also uneven even between the states. It is therefore imperative to establish small to medium sized industries in the first phase to begin harnessing this potential in as much viable centres as possible. The Indian government has also taken several steps towards this direction, but most of these steps remain in paper.
For a very long time, the northeast states have not seen much improvement in the condition of the roads and other transport networks. This poor transport infrastructure is a big problem for trade in this region. The rail network is limited because of the topography. For some time now, plans have been made to upgrade, build and rebuild roads all over the Northeast but it can be seen that the plans have not been implemented on a war footing. Remote areas remain remote and inaccessible villages remain inaccessible. The plans to connect India, Myanmar and Thailand (trans-Asia highway), the planned railway link between India and Myanmar, the Rhi-Tiddim and Rhi-Falam roads, the Kaladan Multimodal Transport Project and the proposed bus service are still in their infancy at this stage. 1,310 Km of the plan announced by the Defence Minister in 2006 is supposed to have been completed by this year (2009). No one knows where the upgraded 1,310 Km road runs through now. Therefore, the upgradation of transport facilities and the development of roads, rail, river and air transport has become the need of the hour in the face of recent developments.
If we examine the markets, trade items and products between India and ASEAN, it can be seen that many of the trade items are products from mainland India and not from the Northeast. This was because of the low productivity level in the region. It therefore becomes quite difficult to identify the potential Northeast products for export into ASEAN as the region produces too little tradable items presently. Even for those items that can be traded, the volume is too small to be traded internationally. As the region remains underdeveloped in all sectors, the potentials that it has becomes limited once again. A vicious cycle of underdevelopment, low productivity levels and isolation thus occurs here.
A problem that most developing countries face in regional trade is that they produce the same primary goods limiting the scope of any trade-led developments. In our case, many of the products which we find in the Northeast, notwithstanding its small volume, are also produced in ASEAN countries. For example, tea is also produced in ASEAN countries especially in Vietnam and Indonesia. In fact, Vietnam produces tea, coffee, rubber and fish and is one of the largest producers in the world. As for rice, Thailand is the second largest exporter of rice in the world with Vietnam coming second. Indonesia is also a major producer of coffee. The direction of trade for tea plantations in Assam and other states of the Northeast becomes quite difficult to navigate.
One glaring problem for trade in this region is topographical. The mountain ranges, thick jungles and winding river networks make this place hard to access and hard to develop to make it a proper linkage and centre. This is worsened by the poor surface and air transport system. The geographical feature of this region also hampers the development of the transport system. But the blame cannot and should not be laid on this alone.
Even though it can be seen that there have been changes in the policy of the government towards the Northeast during the past few years, for a very long time the policy of the government towards the Northeast was shaped by its security concerns. This remains a serious inhibitor to investment from major companies or neighbours. Indeed, the porous borders and the many insurgent groups in Northeast India are to be matters of concern for the security establishment. And in spite of India’s improving relations with Myanmar, the growing power of the military junta in this country could also remain a hurdle for India and the ASEAN countries in their pursuit of freer border trade. This could in turn also affect the Northeast states. If this becomes a hurdle, then India would have to conduct its businesses through the sea route. The future of the Northeast states will then remain unsure once again. An important point to note is that although trade performance has improved with India’s eastern neighbours over the years till now, many of these exchanges had been done without the Northeast states playing important roles. Most of the volume of trade has so far been conducted through the sea routes bypassing the Northeast states. In fact, only Moreh trade centre in Manipur is functioning out of the several trade centres proposed and planned. But then, looking at everything from the security point of view is also bound to constrain economic development opportunities. A fine balance between security, economics and politics should be maintained so that the roots of all the problems in the Northeast can be done away with.
The weakness of the forces of production, poor infrastructural facilities and technology in addition to the underdeveloped transport and communication routes have also hampered productivity and trade within the region. While labour is quite plentiful, there is also the lack of skilled labour. Therefore, while trade between India and ASEAN has remained buoyant for some years now, its impact has not been felt in the Northeast so far. The infrastructural facilities, transport and communication and trade centres have not been developed enough to let the Northeast states become the centre of trade between them. Among the notified and approved trade centres in the Northeast, till now, only Moreh trade centre in Manipur is functioning while at the trade centre of Zokhawthar in Mizoram, very informal trade has started. Even here, trade remains insignificant. Steps have to be taken to renovate and build new buildings and other structures in this trade centre. Recently, tradable items between India and Myanmar at Moreh had been increased to 40 items from the previous 22 items. But the bilateral trade between India and Myanmar do not extend much beyond granting formal sanctions to the already existing exchanges between the local people. In effect, border trade remains insignificant and did not contribute much towards economic growth for neither country. The trade centre at Zokhawthar in Mizoram is still not regulated well enough as some local reports have mentioned problems that have arisen due to the high transport costs of goods brought from this centre to the state capital. The transportations of the goods are allegedly undertaken by the Zokhawthar Welfare Committee and the Champhai Transport Union.[20] The Indian Ambassador to Myanmar Alok Sen was quoted to having said, “it is hard to say if Mizoram state and India will profit from border trade, because the activity is still very much informal.”[21]Concluding remarks
It is understood that the Northeast states have huge potentials for growth, development and for trade. It is also known that these states are an important link, a ‘gateway’ to Southeast Asia. It is again known that the physical infrastructures are so poor and that this region cannot properly become the centre trade for India with its eastern neighbours. But what has been done to solve all these? We have seen the many plans and proposals for development and some of the works that have been done. These, certainly, are still not enough; and we all know this first hand.
For trade and commerce to flourish, the entire network of transport and communication, industries and agriculture throughout the Northeast also needs to be revamped and developed. If the northeast is to benefit from any improved trade relations or any present or future FTAs, the numerous plans and proposals that has been put forth and are in paper only must be implemented and brought to fruition first. The very few roles that the northeast states are playing right now should also be promoted to a more central role. In order to undertake any development projects for trade in Northeast India, it is imperative that the civil society and the government work hand in hand.
In a nutshell, Northeast India, a storehouse of great natural resources but very backward economically, needs to be built up and readied if it is really going to be the ‘gateway’, ‘arrowhead’ or ‘centre’ of trade between India and East Asia. Unless the region is developed to catch up with the rest of the country in its growth rate and development, it will be hard to achieve what the people aspired for – peace, security, prosperity and all round development. To make this possible, substantial investment in infrastructure, construction of roads, bridges, communication networks, harnessing of the region’s vast natural resources and other physical infrastructures that will facilitate trade and economic progress needs to be developed. The prism of security through which policy makers have been looking at the Northeast states also need to be changed to one that mirrors a more optimistic side of this beautiful region – the Northeast.
The Indian government also concedes that the Northeast has a long way to go to achieve the national growth rate of nearly 9 per cent. The growth rate of Northeast is only 4 per cent. Increasing the growth rate and economy of this region will be an important step because herein lies many solutions to some pressing political and security problems.REFERENCES
WTO (1995), Regionalism and the World Trading Systems, Geneva: WTO.
World Bank (2000), Trade Blocks, Oxford: OUP.[1] ASEAN was formed in 1967. Thailand, Indonesia, Malaysia, Singapore and the Philippines constituted the five original members. Brunei became a full member in 1984; Vietnam in 1995; Laos and Myanmar in 1997; and Cambodia in 1999. [2] Prime Minister Dr. Manmohan Singh’s address at the 16th Asian Corporate Conference driving global business: India’s new priorities, Asia’s new realities. URL: http://www.indianembassy.org/newsite/press_release/2006/Mar/35.asp[3] http://www.bernama.com/bernama/v3/news_business.php?id=351756[4] India’s trade statistics and other commercial information can be had from the DGCIS website at http://dgciskol.nic.in[5] http://www.aseanaffairs.com/india_s_engagement_with_asean[6] http://www.india-defence.com/reports/2682[7] http://www.financialexpress.com/news/India-Myanmar-expects-Kaladan-project-to-increase-border-trade/292285/[8] http://www.telegraphindia.com/1090411/jsp/northeast/story_10804322.jsp[9] See http://commerce.nic.in/PressRelease/pressrelease_detail.asp?id=2280[10] http://www.aseansec.org/21895.htm[11] ASEAN+3 include ASEAN, China, Japan and South Korea.[12] http://telegraphindia.com/1050412/asp/opinion/story_4590622.asp also see http://meaindia.nic.in/speech/2005/05/31ss02.htm[13] http://www.aseanaffairs.com/india_s_engagement_with_asean[14] http://neepco.gov.in/neepco6.html[15] http://databank.nedfi.com/content/tea-2[16] http://mdoner.gov.in/index2.asp?sid=129[17] http://commerce.nic.in/publications/anualreport_chapter14.asp[18] http://ne.icrindia.org/2009/02/18/tourism-identified-as-trade-link-between-ne-india-and-se-asia/[19]See http://kaladan.com/390/inner-line-permit-ilp-issue-causes-furore-in-northeast/[20] http://aizawl.org/home/5-mizoram-news/1691-zokhawthar-border-trade-enfiah-dawn[21] http://mizzima.com/news/regional/1956-indian-ambassador-to-burma-discusses-border-trade-with-mizoram.html